9 Responses to “August 2, 2023”

1. fsabbagh says:

   August 2, 2023 at 8:55 pm

   Hi,

   Just wondering how far people go with their preferred shares. I currently have 5% of my net worth in preferred shares (using James’ newsletter for guidance) with 17 distinct shares. What percentage does preferred shares cover in your portfolio/net worth?

   Asking cause I was thinking of slowing down my purchases. I am down only $5K in all 17 shares and am confident they will see their day in the near future.

   Regards,
   Ferris

2. niagara says:

   August 3, 2023 at 6:14 am

   Enbridge reset is “H” series pref:
   “The new annual dividend rate applicable to the Series H Shares for the five-year period commencing on September 1, 2023 to, but excluding, September 1, 2028 will be 6.112 percent, being equal to the five-year Government of Canada bond yield of 3.992 percent determined as of today plus 2.12 percent in accordance with the terms of the Series H Shares.”

   https://www.enbridge.com/media-center/news/details?id=123776&lang=en

3. baffled says:

   August 3, 2023 at 6:42 am

   hello ,fsabbagh says: , i am at 12% . it is mainly driven by the favourable tax treatment of div over int . unlike you , i think they will come back , but it will not be in the “near future” , as i do not think int rates have stopped being increased . when rates come down the price of the pref will go up . 1 thing i am doing is selling 1 companies issue and buying the equivalent issue of another company , this lets me use the loss against gains i have , mainly from my earlier oil stock investments

4. fsabbagh says:

   August 3, 2023 at 9:09 am

   Thanks baffled for your feedback. Love your idea of switching to an equivalent issue to use the loss against gains.

5. Nestor says:

   August 5, 2023 at 12:22 am

   the beauty of prefs … such an under appreciated asset class.

   where else are you going to make a 10%+ dividend equivalent to 13%+ interest today?

   i managed to buy some ifc.pr.a during the covid drop. around $10.75. it was yielding around 8% at the time. it reset last dec. now i’m making ~$1.2, just over an 11% dividend equivalent to 14.5% interest. should i have sold it higher? will i ever sell it? where am i going to find such a return elsewhere? a 10 year bond? i don’t know. i’m sure there are some better deals out there where i can swap it out for something else. oh well.

   mostly, i’ve focused on owning floaters and fixed rests the last two years. i don’t own perpetuals. these have held up better. most floaters are basically break even in price in the last two years. look at trp.pr.h, slf.pr.j etc. most have been in a range for the last two year while dividends have exploded.

   normally, if i saw rates falling, i would want to own perpetuals. but as someone pointed out in another thread. the relationship between perpetuals and fixed resets has blown out and it doesn’t make sense to own perpetuals now.

   so, i’ll stick to what i own. grudgingly accepting 10%+ annual dividends until things normalize.

6. stusclues says:

   August 6, 2023 at 9:10 am

   “the relationship between perpetuals and fixed resets has blown out and it doesn’t make sense to own perpetuals now.”

   It is amazing how underappreciated this state of affairs seems to be, at least among the chattering classes.

7. Avoid the Herd says:

   August 7, 2023 at 9:02 pm

   stu, state of affairs is underappreciated because the pfd market is small and liquidity is almost non-existent. There is also about half a dozen sector ETFs. This means that very few individual investors are managing their own portfolio of pfd stocks.

   The net result is an abundance of value priced securities.

8. stusclues says:

   August 8, 2023 at 9:02 am

   “The net result is an abundance of value priced securities.”

   Agreed. What I am amazed about is the length of time pockets of value (and pockets of junk) can persist in our so-called efficient market.

9. August 9, 2023 « PrefBlog says:

   August 9, 2023 at 7:17 pm

   […] PerpetualDiscounts now yield 6.84%, equivalent to 8.89% interest at the standard equivalency factor of 1.3x. Long corporates yielded 5.26% on 2023-7-31 and since then the closing price has changed from 14.92 to 14.71, a decrease of 141bp in price, with a Duration of 12.26 (BMO doesn’t specify whether this is Macaulay or Modified Duration; I will assume Modified) which implies an increase in yield of about 12bp since 7/31 to 5.38%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained steady at the 350bp reported August 2. […]